Saudi Arabia has lashed out at Lebanon, cutting off billions of dollars of aid and telling its citizens to leave the country, after Beirut sided with Iran in the fallout over the execution of a Saudi Shiite cleric, in a diplomatic dispute that threatens Lebanon’s struggling economy.

The tension reflects the worsening Sunni-Shiite conflict in the Middle East, which is driven by regional powerhouses Saudi Arabia and Iran, who are fighting proxy wars in Syrbia, Yemen and, to a lesser extent, in Iraq.

Saudi’s punitive measures against Lebanon began last week after the Lebanese foreign minister, Gibran Bassil, an ally of the Iranian-backed Hezbollah group, declined to support Saudi resolutions against Iran during two meetings of Arab and Muslim foreign ministers.

The resolution sought to condemn Iran over attacks on Saudi diplomatic missions following Riyadh’s execution of prominent Shiite cleric Nimr al-Nimr in early January.

Riyadh announced Friday it was halting $4 billion in aid grants due to what it described as stances taken by Lebanese officials which “were not in harmony with the ties between the two countries.”

This week, Saudi Arabia called on its citizens not to travel to Lebanon for safety reasons and ordered those staying there to leave. Its Gulf allies Bahrain, Kuwait and Qatar predictably followed suit, issuing similar warnings. The United Arab Emirates also banned its citizens from traveling to Lebanon and withdrew a number of diplomats from the country.

Lebanon’s political elite is deeply divided between two powerful Saudi and Iran-backed coalitions. The spat has exacerbated divisions among Lebanon’s notoriously fractious politicians, who traded accusations over the billions of dollars lost. Lebanon has been without a president since May 2014 and parliament has failed to elect a new head of state because of lack of a quorum.

Concerns have been sparked that further steps could be taken by Saudi Arabia and its neighbors, such as gulf airlines halting flights to Beirut or the eviction of thousands of Lebanese who work in the oil-rich region, a move that would have a devastating effect on Lebanon’s crumbling economy.

There are some half a million Lebanese living in the gulf. They transfer billions of dollars to their home country in remittances, giving a boost to Lebanon’s economy, which has among the highest debt in the world — currently standing at $70 billion or 145 per cent of GDP.

Lebanese economist Louis Hobeika said the eviction of Lebanese migrant workers in the gulf would be the most damaging move Saudi could make. Yet, he suggested that such retaliation would be mutually harmful. “Lebanese hold key positions in companies and it is not very easy to replace him,” he said.

Some analysts say Saudi Arabia is going to deport some foreign workers anyway as projects in the kingdom are cancelled due to falling oil prices.

Speaking to reporters on Thursday before a Cabinet meeting, Economy Minister Alain Hakim urged calm. He said Lebanese should not “panic before any measures by gulf states because such fears harm our economy.”

Local media reports say some worried citizens were changing their accounts in Lebanese pounds to U.S. dollars but officials say people should not worry about the pound since the Central Bank can defend it with its $40 billion foreign currency reserves.

Central Bank governor Riad Salameh told the daily Al-Akhbar that “markets did not show any fears and were very normal this week.”

Saudi officials say they want Lebanon to “fix the mistakes” but did not say how they can be fixed.

“Mistakes were made in two international arenas,” said Saudi ambassador to Lebanon Ali Awad Assiri. “What is wanted now is for the side that made the mistake to fix it.”

Some local media reports in Lebanon have argued that the Saudis may be applying pressure to secure the release of a member of the royal family held in Lebanon since October on drug charges.

Abdul-Mohsen al-Waleed Al Saud , was detained in Beirut after authorities seized two tons of amphetamine Captagon pills before they were loaded onto his private plane. On Wednesday, a Lebanese prosecutor indicted Al Saud of dealing and using drugs.

Other analysts suggest Saudi Arabia may be seeking to compensate for its declining hold over Lebanon.

Saudi Arabia’s influence has been dwindling in Lebanon since early 2011, when pro-Saudi prime minister Saad Hariri was ousted by Hezbollah and its allies. For the past two years, the Saudi-backed March 14 coalition has failed to see one of their leaders elected president. Now they are nominating legislator Suleiman Franjieh, a friend of Assad and a close ally of Hezbollah, for the country’s top job.

Meanwhile, Hezbollah, which has sent thousands of fighters to back Syrian President Bashar Assad’s forces, is benefiting from recent victories against Saudi-backed insurgents in Syria.

“Saudi Arabia (is) feeling for a good reason that its influence in Lebanon is on the decline,” said Ayham Kamel, a Middle East expert with the political risk and consulting firm, Eurasia Group.

“The Saudi message is don’t think you can translate victories in Syria and control the system in Lebanon. We have plenty of leverage through our economic muscles,” Kamel said.